EU to investigate Aegean Airlines takeover of Olympic Air

By Victoria
April 24, 2013 11:51

The European Commission has opened an in-depth investigation under the EU Merger Regulation into the proposed acquisition of Olympic Air by Aegean Airlines. The companies are the two main Greek airlines offering passenger air transport services on Greek domestic and international routes. Each of the companies operates a base at Athens International Airport. The Commission has concerns that the transaction may lead to price increases and poorer service on several domestic Greek routes out of Athens, where the merged entity would have a monopoly or an otherwise strong market position.
The Commission now has 90 working days, until 3 September 2013, to take a decision on whether the proposed transaction would significantly impede effective competition in the European Economic Area (EEA).
Commission Vice President in charge of competition policy Joaquín Almunia said: “We have the duty to ensure that Greek passengers and people visiting Greece can travel at competitive air fares, even more so during challenging economic times.”
The Commission’s initial market investigation indicated that the proposed transaction raises serious competition concerns on a number of Greek domestic routes where Aegean and Olympic currently compete or are well placed to compete. These routes are used not only by Greek passengers, but also by a large number of foreign travellers, given the popularity of Greece as a tourist destination.
The Commission’s assessment takes account of relevant factors, such as the state of the Greek economy and the financial situation of the parties. However, the investigation so far showed that the proposed acquisition would give the merged entity a monopoly on the routes from Athens to Chania, Santorini, Mytilene, Corfu, Alexandroupolis and Kos, to the detriment of ticket prices and service level offered to passengers travelling on these routes. On other Greek domestic routes where both airlines operate alongside Cyprus Airways (i.e. from Athens to Thessaloniki, Heraklion and Rhodes), the transaction would remove an important competitor.
Moreover, the Commission’s investigation provided indications that the two airlines’ largest competitor, Cyprus Airways, may not continue to act as a viable competitive force on the Greek domestic market in the future. Finally, the Commission’s initial market investigation revealed no indications of entry prospects that would occur on a scale and within a timeframe capable of constraining the merged entity and disciplining its pricing behaviour.
The commitments proposed by Aegean during the preliminary investigation did not address these serious competition concerns, says the Commission, which will now investigate the proposed acquisition in-depth to determine whether its initial concerns are confirmed or not.